Operator of Papago Golf Course files Chapter 11

Phoenix officials vow to keep play moving at Papago Golf Course in the wake of a bankruptcy filing Wednesday by the firm that operates the course.

AGA Management LLC filed for protection under Chapter 11 of the U.S. bankruptcy code to restructure $9.5 million of debt incurred to make renovations on the course.

Papago is one of eight city-owned courses but the only one run by AGA.

"It shouldn't be obvious to the golfing public," said James Burke, assistant director of the city's Parks and Recreation Department, adding the city intends to keep the course open.

AGA is a non-profit organization and an affiliate of the Arizona Golf Foundation, which is dedicated to the advancement of public-access golf courses and the support of junior golf. The foundation is a subsidiary of the Arizona Golf Association, which is not impacted by the filing.

The debt was incurred in early 2008 to finance a new clubhouse and various other improvements, but AGA stopped making payments around June.

The debt, in the form of Industrial Development Authority bonds, is owned by BBVA Compass Bank, the fifth-largest bank operating in Arizona. A spokesman for BBVA Compass, based in Birmingham, Ala., and a unit of Spain's BBVA, declined to comment.

City taxpayers aren't liable to repay the bonds. But AGA this year also stopped making rent payments to the city. The rent runs about $200,000 a year, Burke said.

Papago, nestled below red-rock buttes near the Phoenix Zoo and Desert Botanical Garden, once was considered a crown jewel among municipal courses. It was designed by famed course architect William Francis "Billy" Bell and hosted the U.S. Public Links Championship in 1971. But it gradually fell into disrepair, with sloppy sand traps, neglected water holes and overgrown trees.

The bond debt was incurred by AGA to finance various improvements at the course. AGA made some improvements, such as installing a new irrigation and drainage system and replacing bunkers, but not others, including construction of a clubhouse and revegetation, Burke said. Last week, the city declared AGA in default for failing to complete the renovations and make rent payments.

AGA was about three years into a 25-year management deal with the city, Burke said.

In a statement, AGA said its filing came after months of negotiations with Phoenix and BBVA Compass. AGA said it was unable to make debt payments as a result of the soft economy.

"When we embarked on this journey, the economic situation was much different than it is today," Tim Kloenne, president of the Arizona Golf Foundation, said in a statement. "As with nearly every golf course in the country, revenues are down severely from what was anticipated in the original contract and all parties must adjust expectations."

City officials say they notified AGA that it had breached the agreement in late 2009 but gave the group several months to avoid a formal default.

AGA will continue to operate the course short-term until a replacement is found, Burke said.

Kloenne expressed confidence that a successful restructuring would allow AGA to continue managing the course and complete the renovation.

"We intend to do everything possible to ensure that Papago Golf Course will continue to conduct business as usual," he said.